Balendra Shah became the 40th Prime Minister of Nepal on Friday after the Rashtriya Swayamsevak Sangh (RSS) secured a close two-thirds majority. The Finance Minister in this majority government is economist Swarnim Wagle. In its manifesto, the RSS has set a target of an average economic growth of 7 percent (at constant prices) in five years, a per capita income of more than 3,000 US dollars, and an economy size of close to 100 trillion. The role of the Finance Ministry is crucial in achieving these goals. 

The implementation of the manifesto, such as reducing all tax burdens, not imposing ghost taxes, and setting income tax limits based on family burden, is not easy.

Prakash Kumar Shrestha, outgoing vice-chairman of the National Planning Commission, said that the government will have to work hard to achieve the goals mentioned in the RSVP's manifesto, including economic growth and per capita income, as they are ambitious. The newly appointed Finance Minister Wagle is committed to implementing the second phase of economic reforms as per the roadmap mentioned in the manifesto. During his assumption of office, Finance Minister Wagle also initiated the implementation of the recommendations of the High-Level Economic Reforms Suggestion Commission, 2081. As his first decision, Wagle has decided to abolish the Revenue Investigation Department as recommended by the commission and to immediately move forward with the process of abolishing or amending 15 different acts. 

Wagle said that the 'economic status report' up to 11 Chaitra 2082 will be prepared within five days and a 100-day, half-yearly and annual action plan will be prepared to implement the election manifesto. He said that the government will move forward towards effective implementation by internalizing the RSVP's election manifesto. Finance Minister Wagle also said that priority will be given to formulating new bills and amending existing laws to protect and promote private enterprises and businesses, facilitate large development projects and remove procedural hassles. 

Finance Minister Wagle mentioned that a policy will be adopted to solve the problems seen in the economy as a whole, not piecemeal, and that systemic reforms will be carried out by removing discretionary powers. Finance Minister Wagle said that priority will be given to implementing the recommendations of the Public Expenditure Review Commission, increasing domestic production, creating jobs, and preparing a transformative budget. Finance Minister Wagle also said that efforts to move towards a 'paperless' and 'cashless' system by promoting the e-governance system will be initiated from the Ministry of Finance.

Although some indicators including foreign exchange reserves and balance of payments are strong, Wagle has become the Finance Minister at a time when the situation of revenue collection, capital expenditure, and foreign grants is critical. Experts argue that the challenge before him is to bring the economy back on track by increasing revenue collection and capital expenditure and controlling current expenditure at a time when policy corruption, financial mismanagement, revenue leakage, and procrastination are rampant.

The government will have to work hard to achieve the goals mentioned by the Rashtriya Swayamsevak Sangh (RSS) in its manifesto, including economic growth and per capita income, as they are ambitious, said outgoing Vice Chairman of the National Planning Commission Prakash Kumar Shrestha. 

‘First of all, the investment environment in the country will have to improve. Then, effective demand in the market and capital expenditure will have to be increased,’ he said. ‘The country is under external pressure due to the conflict in West Asia. This has also affected Nepal’s tourism. In such a situation, along with domestic production, effective demand and exports should also be increased in the country,’ he said. 

Since the new Finance Minister is due to present the budget in the next one and a half months, the Finance Ministry will also have to get involved in budget preparation. ‘The most important thing is to learn from the past and select projects well,’ said Shrestha. ‘Then, the bureaucracy should be encouraged well in the budget implementation phase.’

Former Vice Chairman Shrestha said that the Finance Ministry should also do a lot for public finance management. ‘Fiscal federalism is not being implemented well. The imbalance between the federal government's income and expenditure is more than 1.5 trillion. Or the federal government is in deficit by about 1.5 trillion. But when the money in the accounts of the provinces and local levels is added, the government's treasury is in surplus by 4.5 trillion. This has accumulated money with the provinces and local governments that have not been able to spend it, while the federal government's treasury is in deficit. Shrestha says that the new 

government should increase the spending capacity of the local and provincial governments and transfer as much work as possible to the local level through the provinces.  The RSVP plans to review the exchange rate of the Nepali currency with the Indian rupee, which has been stable for three decades, introduce a 'one-step' service to encourage investment, and complete projects of national pride that have been dormant for 12 years within 2 years, replace the uncontrolled and weak regulation of cooperatives and microfinance and bring the entire non-financial sector under the regulation of the National Bank, and form a second-tier regulatory body with high authority to regulate cooperatives and microfinance with transactions of more than 500 million. It is also mentioned that the regulatory body Securities Board will be restructured to make the capital market systematic and given the necessary autonomy, and that NEPSE and CDSC will be restructured. 

  The pledge promises to replace the uncontrolled and weak regulation of the cooperative and microfinance sectors and bring the entire non-banking financial sector under the direct and powerful supervision system of the Nepal Rastra Bank. Former Finance Minister Prakash Sharan Mahat said that the new Finance Minister should work hard to reduce the gap between income and expenditure. ‘The new government has said that it will create a lot of jobs. That is good. However, the challenge of fulfilling it is not normal. The international situation is also unusual. Therefore, the government needs to be practical,’ he said, ‘Returns will not come by talking about popular issues. To bring good results, it is necessary to find the root of the problem and work hard.’ 

On the one hand, resources are scarce and the needs of citizens are many. The responsibility of social security is great. There is also no way to reduce the expenditure of security agencies. In such a situation, a lot of work will have to be done to meet the necessary expenses through efficient management of available resources, large infrastructure and job creation. Therefore, the gap between income and expenditure will have to be reduced by managing as many resources as possible and meet the various needs of the citizens. Mahat said that this government has no room for excuses as it has a majority government. 

The Rashtriya Swayamsevak Sangh (RSS) has promised to release the directors and managers who were jailed for defrauding cooperatives and are in pre-trial detention with conditions. In the pledge, it has promised to replace the uncontrolled and weak regulation of the cooperative and microfinance sectors and bring the entire non-banking financial sector under the direct and powerful supervision system of the Nepal Rastra Bank. 

‘Our aim is not only to jail the directors, but also to return the money of the savers. Therefore, in accordance with the policy of resolving disputes by listening to each other, not by closing them, if the directors or management of a cooperative financial institution are ready to return the money of the savers and they have reliable resources and plans, we will pave the way for a settlement,' the pledge states. The Rashtriya Swayamsevak Sangh (RSS) has promised to return the money of small savers within 100 days of the formation of the government under its leadership. The pledge does not mention who will return the money and how much money is considered a small saver. 

The main economic agenda of the RSS

The RSS had made the pledge public by stating one hundred bases for policy departure for the transformation of the country. Among the 100 points mentioned in the pledge, titled 'Resolution to Create a Situation', the main economic agenda is as follows.

- Effective coordination of private investment and a capable, transparent and facilitating public role will be ensured 

- The private sector will play a leading role in job creation, supply of goods and services, revenue contribution and flow of investable capital, and the role of the government will be that of a regulator and facilitator 

– A professional, transparent and powerful regulatory body free from political interference will be established and strengthened to control distortions such as cartels, unhealthy competition, rent-seeking and policy exploitation 

– A realistic, balanced and sustainable economic model for Nepal will be adopted within the framework of a social market economy that promotes innovation, fair competition and social responsibility in a balanced manner

– A liberal economic policy that promotes the dynamism, innovation and creativity of the private sector and equitable redistribution of national income will be implemented through public education, health, transport, housing and social security

– The welfare state will not be limited to the distribution of benefits but will transform the nature of growth and build the basis for long-term economic, social and environmental balance 

– About two dozen laws that are obstacles to economic progress or are irrelevant will be repealed, cumbersome laws and procedural procedures will be repealed or reformed in a series to reduce the cost of production, improve the business environment (doing business), and attract domestic and foreign investment in priority areas of economic growth

– Nepal will establish itself as a ‘respectable middle-income country’ by maintaining an average annual economic growth rate of 7 percent for the next five years

– Within five to seven years (at current prices), the per capita income will exceed $3,000 and the size of the economy will approach $1 trillion;

– We will stop planned tax evasion, and for the bright future of middle-class families and children, we will review the income tax limit based on ‘family burden’ 

- Institutional savings programs will be encouraged by making a legal provision to deduct a certain amount from taxable income for education, health and upbringing expenses.

- The exchange rate with the Indian rupee that has been stable for three decades will be studied and reviewed.

- A one-stop service center will be implemented with a provision that no one has to visit other agencies after submitting files at one place to promote and facilitate domestic and foreign investment.

- Necessary laws, regulations and procedures will be formulated and implemented effectively for investment facilitation. Business registration will be made easy, fast and free through digital means.

- A skilled professional unit with a majority of chartered accountants will be created to conduct revenue investigation and monitoring to control corruption.

- A 'result-oriented time-bound action plan' will be implemented to make it mandatory to complete idle national pride projects within two years for Nepal's economic transformation.

– The entire non-banking financial sector will be brought under the direct and powerful supervision system of Nepal Rastra Bank by replacing the uncontrolled and weak regulation of the cooperative and microfinance sectors.

– Cooperatives and microfinance with transactions exceeding Rs. 500 million will be subject to strict regulation by the Rastra Bank and the same standards as ‘D’ category financial institutions. A ‘second-level regulator’ will be formed for the systematic operation of small institutions.

– Savings of small savers of cooperatives will be returned to their accounts within 100 days of the formation of the government. A ‘Unified Savings Security Fund’ will be established by the state to protect the earnings of savers.

–Meterbagging and improper transactions will be defined as ‘economic crimes’ and all its networks will be legally and structurally dismantled within five years

–A fully empowered ‘Fast Justice Task Force’ will be formed to judicially investigate all illegal ‘tamsuk’ and Kapali tamsuk committed in the past and return the land and property of the victims

–Meterbagging-free Nepal and financial sovereignty will be ensured

–Regulatory reforms, technology-friendly transaction systems and investor protection mechanisms will be strengthened to make the capital market transparent, secure and investment-friendly

–The Securities and Exchange Board of Nepal will be restructured to provide adequate manpower, enhance efficiency and provide necessary autonomy

–The Nepal Stock Exchange (NEPSE) and CDS and Clearing Limited will be restructured to increase private sector share participation and develop competitive depository services